There is something very odd about the recession that is now supposedly enveloping us. For once, it is not being led by that sure-fire traditional indicator – a rapid decline in marketing spend. Nor, outside the significant exceptions of financial services and the building industry, has there been a marked up-tick in unemployment.
True, fear has been stalking the land since the liquidity crisis reared its ugly head a year ago, and there have been significant repercussions in depressed retail sales and, to put it mildly, the bottom dropping out of an overheated housing market. But the world has hardly fallen in for marketers – yet.
Indeed, the situation is rather as Jeff Bewkes, chief executive of Time Warner, recently portrayed it: “The economy is the biggest strategic question in everyone’s mind. But it hasn’t had a big effect on Time Warner’s earnings, revenue and growth.”
Whether this is ground for reassurance is another matter. Economic historians have been quick to point out the parallels with the Florida property bust in 1929 and the Wall Street Crash that followed. They likewise highlight the financial crisis which preceded the nasty little recession of 1973/4.
As it happens, extensive intervention by the Federal Reserve and the quasi-nationalisation of an extensive part of the US banking system by a Republican administration suggest that this particular crisis will pan out as no other over the next two years. Historical parallels may well be wide of the mark.
But one or two certainties are beginning to emerge, where marketers are concerned at least. For all the derision about high power “flower arrangement”, financial services have in recent years provided a ready and rewarding haven for some of the UK’s most talented marketers. No more. The era of Andy Hornby, the Asda marketer who made it to chief executive of HBOS, is over.
A massive shrinkage of opportunity is setting in. The wide array of goods and services on offer – and most likely many of the brands behind them – are falling prey to a whirlwind of consolidation which still has some way to go before its course is run.
Just as importantly, a climate of fear has chilled the appetite for risk. This is abundantly clear in banking circles, where the complex market segmentation of yesteryear will most likely give way to something much more austere and conservative. Why bother with price-fighting strategies à la Hornby when the cost of credit has become so high that many people won’t be able to afford it for the foreseeable future?But the chill winds of austerity are also becoming apparent in other areas of the economy less obviously affected by the banking crisis. For example, in the flight to value food lines stocked by the likes of Aldi, Lidl and Netto; in the sudden abandonment of flashy four-wheel drive motor vehicles; in a growing enthusiasm for take-away meals in place of restaurant treats; and, if B&Q’s surprisingly buoyant results are any guide, in a renewed preoccupation with DIY improvement of that home you can no longer sell. Cover story, page 18